NCLT may take seven years to clear 2,500 pending cases: Report

Mumbai, Jan. 17 -- The National Company Law Tribunal (NCLT) set up under the Insolvency and Bankruptcy Code 2016 may not be fully ready to handle 25,000 cases pending cases, according to a recent report by consulting firm Alvarez & Marsal. The report highlights that with the current staff strength, the tribunal will take more than seven years to clear the backlog.
The report comes at a time when lenders have filed two insolvency cases with the tribunal-one against Bharati Defence and Infrastructure Ltd and the other against Pune-based steel products maker Innoventive Industries Ltd. It, therefore, claims to highlight the apprehensions of "the largest lenders whose experiences have been soured by the state of affairs at the Debt Recovery Tribunal (DRT) and Board for Industrial and Financial Reconstruction (BIFR) and echo similar apprehensions for the adjudicating authorities".
According to the report, there are 4,000 pending cases in the Company Law Board (CLB) that are expected to move to NCLT as the CLB stands dissolved. In addition, 700 pending cases at BIFR, 5,200 winding-up and amalgamation cases in high courts and 15,000 cases in DRT related to corporates are expected to be transferred to NCLT. But with just 11 benches and 62 judicial and technical members, the report explains, NCLT will not be able to handle the mountain of pending cases.
The report recommends the need for guidelines for transfer of pending cases to NCLT from DRT or BIFR based on the size of exposure, size of consortium and case length. The report also suggests the need for dedicated benches only to hear solvency cases at NCLT.
The Insolvency and Bankruptcy Code 2016 was passed in May 2016 and subsequently, a four-member Insolvency and Bankruptcy Board of India (IBBI) was constituted under M.S. Sahoo, former whole-time member at capital market regulator Securities and Exchange Board of India (Sebi). The main activity of IBBI was to regulate the functioning of insolvency professionals, insolvency professional agencies and information utilities.
Besides recommending increase in the staff strength of judicial, administrative and technical teams, the report also lays emphasis on improving the infrastructure. "Mapping the DRT location with NCLT raises a possibility that transfer of cases from some of the DRTs to adjacent NCLT might be a tall order for lenders," read the report.
Other suggestions made by the report include constant monitoring of judicial and technical members on a regular basis and internal audit of large cases to ensure judicial integrity.